What do you focus on most when rehabbing a rental?

21 Replies

I'd like to hear from some experienced rental property investors about what you focus on in your markets when rehabbing a rental. I hear a lot of people say kitchens, floors, paint, etc. Do any of you replaces furnaces, HVAC systems? Do you do full guts? Would love to hear what most of you are doing.

I'm new, but what I will say is that it depends on the condition of the rental. first thing is making sure that it's going to be inhabitable plumbing electric structural. After that, look at your market. Does your mark a call for it to be completely renovated with granite countertops or are you in a area where from make a countertops and big box store cabinets are the norm. As far as floor and paint, my understanding is to keep it as simple as possible. So that means something you can easily clean or repair when a tenant moves out.

In rentals and flips I replace all switches, outlets, and covers. When painting, the extra day of visible new electrical takes it the extra mile. 1 Service call for a bad outlet pays for the replacement of pretty much an apartment worth.

Plumbing can be a major expense so when I have an apartment leak. I don't "fix" leaks in ceilings. While drywall is out we replace entire plumbing runs so a ceiling is only ever out once in a room. I have 2 story apartments so I can almost take care of 2 units at once, 1 Leak at a time. 

I learned this after having the same bathroom torn apart twice a year apart. The leak was 3 ft from the original sharkbite repair.

Disclaimer: I've done this exactly once.

First, you have to make sure it doesn't fall over or kill anyone.  This is stuff like fixing the foundation (uncheap), replacing rotted flooring, replacing the furnace vent pipe/flue if it's rusted out, replacing old or bad wiring, and so on.

"Fixing it so it doesn't break at 3 AM" and "making it look attractive" compete for second and third.  "Break at 3 AM" includes things like removing the icemaker hookup, installing new shut-off valves and flex lines at the sinks and toilets, and putting in a grid drain instead of a pop-up drain in the bathroom sink.  "Look attractive" is paint, countertops, and so on.

Like @Blake Garcia , I also replace all the switches, outlets, and covers.  The parts end up costing about $2 per location but it improves the look a lot.  Get the "spec grade" switches and outlets that sell for about $1 apiece, rather than the ones that cell for $0.50 apiece - the spec grade ones last longer and are nicer to install.  I like to use the nylon plates that are somewhat flexible; they're more resistant to shattering, and they also sit a little better on the wall if the wall is not perfectly flat around the outlet box. If you're doing a whole house worth, or even a whole apartment, buy the devices and plates in boxes of 10 to get a bit better price.

When replacing outlets, move any "back-stabbed" connections to the side terminal screws; this gives you a better connection and reduces the voltage drop in the circuit.  Sometimes this helps you find previous things that were done wrong (like using lamp cord inside a wall), too.

If you have to do it on the low dough show, replacing a cracked switch or outlet with one of the new 50 cent ones is a step in the right direction.  You might take a 2-prong plug around and try it in all the outlets, and replace any that are really loose on the plug.  If the old wall plates are not chipped or cracked, but have paint on them, soak them in Mr. Clean overnight and you can usually get the paint off and re-use them.

I replaced both the furnace and A/C in my SFR, because they were both about 20+ years old. They worked, but I didn't want the furnace hanging over my head in January in Kansas City, and I had planned some money for this when I bought the house.  The new A/C is more efficient just because it's newer; I chose to replace the 80% furnace with a 90%+ furnace as well.  I didn't replace the thermostat, because it was only about a year old at the time... and it failed last week, requiring a Saturday-night trip to replace it.

The bathroom had been redone in the past couple of years, so I mostly left it alone.  I did do the grid drain (above) and move the GFCI outlet for the sink a little bit, because it didn't quite fit in the previous location and was hanging part way out of the wall.

The kitchen has 1980s cabinets and countertops, but the previous owners had bought a really nice stainless oven, dishwasher, and vent hood, so I bought a stainless fridge and declared the kitchen good.  I did repaint in the kitchen.  The kitchen probably won't hold me back from renting it for a few more years, but new cabinets and countertops are on the agenda down the road a little.

If you are upgrading HVAC and have a relationship with installer or distributor be sure to ask if they have any scratch and dent. I got a 5 ton for $2500 and installed for another $600. It had a bad compressor, but was still covered by warranty.

My last 3 ton I purchased in a pinch was $5000 installed.

Similar to washer and dryers, the majority are all made by the same few companies and just branded differently. People will never treat a unit as there own, because it's not theirs. I usually end up with a Goodman or similar with no issues.

Also, sometimes larger units are cheaper because they are overlooked by everyone chasing the "correct size"

I try and make it bullet proof. If anything is questionable I replace with quality material.
I don't like carpet it it needs to be replaced, carpet is not going back in. I don't use laminate flooring. I use solid vinyl plank strips that looks like hard wood floors. 
I make sure plumbing and electrical is in great shape.
HVAC if it is working I'm not going to replace it unless it is causing problems or is super old.

Basically I don't want anything that is going to cause my tenant or me a headache. I'd rather spend the money upfront to keep from getting calls on things that should have been replace while the house was empty.

Originally posted by @Brendon Penner :

@John Underwood

Hey John,

What is your luxury Vinyl plank of choice?

Do you have a minimum wear layer you go with?

Thanks for help here.

 I have standardized on vinyl planks from Surplace Warehouse.

@Blake Garcia

Also, sometimes larger units are cheaper because they are overlooked by everyone chasing the "correct size"

This is bad advice. Cheaper now, but may cost more and cause a headache down the line if it is not properly sized for your ducting. If you intend to hold onto the property, or are just inclined to do your rehabs correctly, get a unit that is properly sized for your ducting and sq footage.

FHA HVAC equipment that is oversized for the installed ducting is prone to shorter life span due to short cycling and potential cracks in the heat exchanger since the ducting will not allow the proper amount of air to be moved across the exchanger. Better to be one of those people chasing the correct size.

@Dion Martorella When you are running your numbers on the purchase side before buying a rehab rental make sure the numbers still work for you based on addressing any major capex in the renovation stage.

Having capex that is most likely within 5 years of needing to be addressed looming over you can not only be risky, but it can prevent you from moving to more investments because you always have in your mind “well the roof and furnace are old at 123 Main St., what if I need to address those tomorrow.”

@David R.

Agree with this. Do a heat load calc and size correctly. It’s better for the equipment, and for the comfort and energy bill of your tenants. Short-cycling causes no end of problems in the midterm. Changing out 12 year old compressors when they should have lasted 25 is gonna hurt.

Oversized AC units won’t properly dehumidify a home, and can lead to mold issues.

Source: I’m an HVAC contractor.

@Jason Allen

I totally agree. Yes ducts and sizing should be reasonably similar. Not doubling from a 3 to a 5 on same property. Just suggesting in my area most properties are not well insulated and most original units are borderline by todays standards.

I should clarrify, i was just comparing the price of a retail vs a discounted unit ive recently purchased.

So, after 8 years I am still learning too (and don't always follow my own guidelines...sigh), but I can definitely say the number one thing to do first and completely when it comes to rentals is address all safety concerns. Then address stuff that needs fixing/is worn, starting with anything that serves to preserve the life of the property. Then finally address stuff that makes it look good.

LOL. I think most of us (just me?), quite naturally, tend to want to do all that backwards.

Some examples:

Chipping paint in a pre-1978 structure? Immediate repair.

Chipping paint in a post 1978 structure? When I get around to it.

Chipping paint on an exterior wood component where the paint serves as protection of the component? Immediate repair no matter the age of the structure.

Salt-damaged or pitted concrete? When I get around to it, maybe never.

Heaving concrete that is a trip hazard?  Immediate repair.

Gotta say, I've learned to look at this stuff the hard way, by focusing on the beauty first, then realizing there is no ignoring the safety, finally concluding I was looking at the wrong stuff when I formulated an offer price and repair estimate, costing me extra money/not getting the deal I thought I was. We are talking about rentals here, not flips.

@Dion Martorella

TIME... To me that's the most important thing when rehabbing a rental..

Not much else matters finish wise on the inside or the outside as long as it looks presentable and it's clean somebody's going to rent it, but TIME is way more important than the other stuff because I want to get it rented as soon as possible. By focusing on this I save tons and tons of money and I get somebody inside that unit fast.

My focus has always been flooring, kitchen, and paint. Those three combined done nicely will make any house look great. I also go for long term appreciation and value add properties, so I need to bring the properties to the neighborhood standards. Nothing more nothing less! 

We always complete all the interior renovations first and then work on the outside as outside work can be done after a tenant is installed. The exact order we usually follow is clean up the yard debris wise, cut back overgrown bushes, etc. Then refurb the interior to the extent it needs after which we advertise the property and start on the outside painting, caulking, roof repairs, gutters, fascia, soffit, eaves, etc. This makes it easy to show as we're there anyway.

You have to balance between replacing and updating. I saw many landlords wasted their time in replacing the appliances and furniture. You need to consider whether it is cost-efficient to spent the cost in exchange for rent rise?